Modern Mining August 2020 Botswana Diamonds plc Article on the acquisition of Sekaka Diamonds in Botswana. High definition version.

1. August 2020MODERN MINING1918MODERN MININGAugust 2020
DIAMONDS
B
otswana Diamonds (BOD) has acquired
a kimberlite pipe in the Kalahari, along
with two adjacent prospecting licences
and a diamond processing plant for a
deferred cash payment of US$300 000 and a
5% royalty on future revenues. The interests are
part of a package held by Sekaka Diamonds, Petra’s
wholly-owned operating subsidiary in Botswana.
BOD is acquiring 100% shares of Sekaka, in a cash
consideration that is payable on deferred basis, with
US$150 000 payable on August 30, 2020, while the
balance is due on or before August 31, 2022.
Speaking to Modern Mining, Campbell says the
KX36 diamond discovery is “an important step for-
ward” for BOD. “Every junior miner has to grow at
some point. You are ‘born’ when you list on the stock
exchange, and then you go through your ‘adoles-
cence’ as you work through your exploration projects.
You hit adulthood with your first classified resource,
and as BOD, this is our first resource. We can now
KX36 gives Botswana Diamonds
its maiden resource
The acquisition of the KX36 diamond discovery, together with two prospecting licences
and a diamond processing plant from Petra Diamonds, affords Botswana Diamonds its first
classified diamond resource. The KX36 kimberlite, which MD James Campbell believes to
be the most significant diamond discovery in Botswana since Orapa and Jwaneng, not
only gives Botswana Diamonds a quick route to possible production, but also adds
scale to the junior exploration company’s Sunland and Maibwe JV properties in the
Kalahari Desert. By Munesu Shoko.
The transaction includes a bulk
sampling plant at the KX36 site.
Petra has already undertaken a
significant amount of core drilling
at KX36.
Exploration work at the KX36 site.
James Campbell, MD of Botswana
Diamonds.
start talking about feasibility and technical studies,
with a view to commercial production,” he says.
Campbell adds that BOD’s goal is to find a project
that is commercially attractive, put it into production
and start generating revenue, and KX36 gives the
company exactly that. “KX36 is a very significant dis-
covery and potentially offers upside potential, as do
the two contagious prospecting licences. We have
evaluated options and believe we can add value to
the discovery,” he says.
“We first looked at KX36 some three years ago.
It’s a high-grade kimberlite, one of the most signifi-
cant discoveries since Orapa and Jwaneng. It was
discovered after painstaking work by Petra, which
just shows that one needs to be more precise to
find these kinds of new kimberlite. Because it’s in
the Kalahari and close to all our other activities in
Botswana, there is a huge synergy,” he adds.
From a geopolitical perspective, Campbell
says Botswana continues to be an exploration
destination of choice for BOD. “They call Botswana
‘the Switzerland of Africa’ for a reason: there is secu-
rity of tenure and a simple mineral taxation regime,”
he says, adding that the southern African country
also ranks highly in the world in terms of low cor-
ruption. “It’s such a great country to do business in.”
Project significance
Explaining the significance of the transaction,
Campbell says there are three important parts to
the acquisition. Firstly, he says, is the KX36 project
itself. Petra Diamonds, he notes, has done a huge
amount of work on the project, and has been able
to determine an Indicated Resource of just under
18-million tonnes (Mt) at 35 carats per 100 t (cpht) and
an Inferred Resource of 6,7 Mt at 36 cpht.
“To get to that particular point has taken a huge
amount of money and effort,” says Campbell.
“Additionally, the KX36 project is in the Kalahari of
Botswana, where we already have a significant inter-
est through our Maibwe JV and Sunland Minerals
properties. The acquisition is synergistic with our
existing exploration licences.”
Secondly, says Campbell, the transaction
includes a bulk sampling plant, which has crushing
and screening, dense media separation and X-Ray
recovery on the KX36 site. “The plant is available
to us as and when we do more work on the proj-
ect itself, and also for working on our Maibwe and
Sunland projects if need be.”
The third leg to the transaction, he says, is
the Sekaka exploration database, which adds to
Botswana Diamonds’ extensive database, improving
the company’s exploration programme, particularly in
the Kalahari Desert where BOD is currently focused.
“The Sekaka exploration database goes back
to almost 20 years of exploration data, and is prob-
ably the most comprehensive diamond database in
Botswana after De Beers. We are sure that when we
interrogate it in more detail we will make more dis-
coveries from it,” he says.
“So the transaction is significant in three ways: it
is the KX36 itself, the sampling plant and the data-
base. Additionally, we also have three prospecting
licences; one of them holds the KX36 and the other
two are immediately adjacent to KX36. There may be
undiscovered kimberlites in the heavy mineral train
of KX36,” says Campbell, adding that you rarely, if
ever, find a kimberlite pipe on its own and further
exploration may discover more kimberlite pipes in
the vicinity.
Work ahead
Campbell notes that Petra has already done a sig-
nificant amount of drilling – including 24″ Large
5% royalty on future revenues. The interests are
KX36 gives Botswana Diamonds
its maiden resource
The acquisition of the KX36 diamond discovery, together with two prospecting licences
and a diamond processing plant from Petra Diamonds, affords Botswana Diamonds its first
classified diamond resource. The KX36 kimberlite, which MD James Campbell believes to
be the most significant diamond discovery in Botswana since Orapa and Jwaneng, not
AllphotoscourtesyofPetraDiamonds

2. August 2020MODERN MINING2120MODERN MININGAugust 2020
DIAMONDS
Keytakeaways
 Botswana Diamonds has acquired a kimberlite pipe in the Kalahari, along
with two adjacent prospecting licenses and a diamond processing plant
for a cash payment of US$300 000 and a 5% royalty on future revenues
 The interests are part of a package held by Sekaka Diamonds, Petra
Diamonds’ wholly-owned operating subsidiary in Botswana
 BOD is acquiring 100% shares in Sekaka, in a cash consideration that is
payable on deferred basis, with US$150 000 payable on August 30, 2020,
while the balance is due on or before August 31, 2022
 The KX36, said to be the most significant diamond discovery in Botswana
since Orapa and Jwaneng, not only gives Botswana Diamonds a quick
route to possible production, but also adds scale to the junior exploration
company’s Sunland and Maibwe JV properties in the Kalahari Desert
KX36 locality map.
LDD drill bits used during drilling
at KX36.
Geology model for KX36.
Diameter Drilling – and processing of a large amount
of kimberlite to get to the Indicated and Inferred
Resource. Petra has also completed a pre-feasibility
study on the project.
Looking ahead, Campbell says the first thing BOD
needs to do is to upgrade the desktop study of the
project. “We have already done significant work
on that and focus will be on two main areas. The
first one will be to narrow the resource variables,
believed to be between 57 and 76 cpht at a value
of between US$65 and US$107 per carat. We will
take another bulk sample to make this determina-
tion,” he says.
The second thing BOD will prioritise is taking a
“very hard look at the mining technology”. “There
is no assumption
that we are going to
employ a standard
opencast mining
method using the
default arrangement.
There has been talk
of a floating barge
and dredging to
remove the high
sand overburden,”
he says.
To give perspec-
tive, Campbell cites
the AK6 project as
an example of the
approach BOD will
take with the KX36 project. When he was MD at
Botswana Diamonds’ predecessor, African Diamonds
plc, AK6 was put under re-evaluation by De Beers
and African Diamonds after originally having been
discovered in 1969 by De Beers.
African Diamonds was in a joint venture with De
Beers on AK6, and there was a difference of opinion
on the merits of developing AK6. African Diamonds
wanted to go ahead with the construction of a new
mine but De Beers was deterred by the cost, which
it estimated at US$380-million, and what it perceived
as poor market conditions for the diamonds. “We
disagreed and came up with a Value Engineering
Study, which indicated a considerably lower capex
and a higher diamond value. We also proposed an
innovative processing route, including the use of
autogenous milling,” he says.
Through further optimisation of the plant and mine
design, African Diamonds was able to narrow the
cost of delivering the AK6 mine to US$120-million, a
third of the initial cost. While African Diamonds was
unable to raise capital to develop the project, the
company, however, found an alternative investor in
the form of Lucara, which later bought out African
Diamonds and proceeded to build a mine – now
known as Karowe – based on the technical solution
African Diamonds devised. Karowe has since estab-
lished itself as one of the outstanding mines in the
global diamond mining industry, and is particularly
renowned for its large gem quality diamonds.
“So that’s the kind of work we want to do at KX36.
Focus will be placed on narrowing the resource vari-
ables, specifically on the mining side rather than the
metallurgical side of things. The other area of focus
will be the mining techniques to reduce mining
capex and opex,” says Campbell.
Timelines
The acquisition, notes Campbell, is subject to cus-
tomary regulatory approvals. BOD will therefore
prioritise the completion of the conditions precedent
on the agreement itself. “There are three important
parts to that. The first one is seeking permission from
the Petra bond holders, the second is Section 23
approval from Botswana’s Ministry of Mineral
Resources and the third is competition approval in
Botswana,” he says.
Once that is done, BOD can press the button on
the desktop study which will start immediately after
the regulatory approvals around September this
year. “I hope that by the end of the year we would
have completed that and then we can start planning
the bulk sampling,” he says.
“In parallel to that, we would like to continue
exploration activities on the other prospecting
licences in the area and see if there isn’t another
KX36 equivalent lurking in the vicinity. That’s obvi-
ously contingent on the COVID-19 pandemic,”
he says, adding that in Botswana the state of
emergency will only be lifted around mid-September.
“It all depends on how quickly we get through the
pandemic and how swiftly we can get back to work.”
JV partnership
In line with its risk-sharing model, BOD may look for a
JV partner to further develop the KX36 project. “Our
model, as far as possible, is to spread our risk by
partnering with people who share the same vision
and values as us,” he says.
The same model has been adopted across many
of BOD’s projects. For example, in Botswana, the
company initially partnered with Alrosa in its Sunland
Minerals subsidiary, which is now 100% owned by
BOD. Elsewhere, BOD is part of the Maibwe JV,
in which it has a 15% carry through to Bankable
Feasibility Study. In Zimbabwe, the company is in
partnership with Vast Resources, a local explora-
tion company and in South Africa, BOD holds 40%
of Vutomi Mining an active diamond explorer in the
country
Project update
Commenting on the state of the rest of BOD’s proj-
ects, Campbell says the company has been able to
complete the Marsfontein bulk sampling process.
BOD collected samples from Marsfontein, located
50 km east of Mokopane in the Limpopo Province
of South Africa, just before the COVID-19 lockdown.
“Because we were allowed to travel within prov-
inces during Alert Level 4 of the lockdown in SA,
we were able to process the bulk sample at African
Diamonds Corporation. The results were what we
forecasted. In exploration, things often don’t go the
way you expect, but in this instance the grade of the
dump and the kimberlite were what we expected,
which is encouraging,” he says.
Once the ban on travel between provinces is
lifted, BOD aims to continue its drilling programme
at Thorny River project, which is adjacent to
Marsfontein. Drilling in early 2020 did not intersect
kimberlite. The site locations were selected using
the latest, state-of-the-art technology. The data is
being analysed and the techniques recalibrated to
select the next tranche of drill sites. The targets are
kimberlite pipes obscured by dolerite.
In Botswana, BOD’s 100% owned Sunland
Minerals subsidiary has several active licences. “We
had planned further drilling during the winter of this
year, but clearly we can’t be drilling now due to the
COVID-19 situation,” he says.
Elsewhere in Botswana, the Maibwe JV, in
which BOD holds 15%, has been subject to sig-
nificant delays due largely to the liquidation of
the main partner, BCL, a state-owned copper pro-
ducer. A new liquidator has been appointed and
proposals are circulating, which would eventually
lead to the resumption of work on four of the 10
licenses where drilling discovered a kimberlite with
abundant microdiamonds.
“Last year a new liquidator was
appointed, and we have been working
closely with the liquidator to progress
this important project,” says Campbell.
“We made two offers to buy out the
majority partner in Maibwe and are yet
to receive any formal response. We,
however, hope that we will receive
feedback soon from the current liq-
uidator. We are keen to progress this
project due to the exceptional microdi-
amond results in one of the kimberlites
drilled. We are cautiously optimistic
that there will be some good news in
the near future,” he says.
State of market
Commenting on the state of the dia-
mond market, Campbell agrees that it
is in a bad space, but based on history,
he is optimistic that it will rebound. “Few
diamonds are being sold at the moment; and when
they are, they are being sold at low prices,” he says.
“However, history shows us that the diamond market
does get hit badly in times like this, but it also does
recover quickly.”
Campbell agrees with Mark Cutifani, CEO of
Anglo American, who was recently on record say-
ing that the diamond market will sparkle during the
fourth quarter after severe COVID-19-related sales
disruptions due to the pent-up diamond sales, and
diamonds symbolise lasting values and are a long-
term storer of value in the current volatile times.
Campbell believes China is a good indicator of
the recovery mode of the diamond market, with a
major Chinese retailer, Chai Tow Fook, opening up
50 new jewellery stores after the Chinese lockdown.
“Typically, during a downturn things drop quite
quickly in the diamond market, but prices actually
rise soon afterwards. I have been in this industry
for 35 years and these cycles come and go,” he
concludes. 